ICI Develops Compliance Review for Fund Intermediaries
Assessment to Assure Compliance and Protect Shareholder Accounts

Washington, DC, November 6, 2008 - The Investment Company Institute has developed a new tool to help funds review the internal controls of broker-dealers, fund supermarkets, and other financial intermediaries that hold clients' mutual fund investments. This new framework promises funds a higher level of assurance that investor transactions are properly executed and that shareholder accounts are properly maintained.

Many fund intermediaries maintain shareholder account information on their own record keeping systems and report share transactions to the fund on an aggregate or "omnibus" basis. Fund sponsors currently obtain assurance regarding accounts maintained by intermediaries through various means, including on-site examinations. Because each fund may have multiple intermediaries and each intermediary may represent a number of funds, these on-site reviews are often duplicative.

ICI formed a working group of its member firms and representatives of the four national accounting firms to develop a framework, the Financial Intermediary Controls and Compliance Assessment, to support an industry standard compliance review for fund intermediaries.

Under the engagement, an omnibus account record keeper would hire an independent accounting firm to assess its internal controls relating to specified activities it performs for shareholder accounts, including account set-up and maintenance, transaction processing, and privacy protection. The auditor would issue a report on the design and operating effectiveness of the intermediary's compliance controls. The record keeper could provide this report to all of the funds it represents, reducing the need for overlapping compliance reviews by each fund. The engagement would be performed under attestation standards issued by the AICPA.

"This tool introduces efficiency and more transparency, and costs will be reduced for both funds and intermediaries," said Thomas J. Hamblin, president of Capital Bank and Trust Company, an affiliate of Capital Research and Management. Hamblin chaired the ICI working group that developed the new framework.

The framework describes 17 separate areas or activities where fund sponsors seek assurance. "The scope of the engagement is intended to be flexible," said Nicholas D'Angelo, an assurance director with PricewaterhouseCoopers. "For example, if an omnibus account record keeper has already obtained a third party examination under SAS 70 [Statement on Auditing Standards No. 70] covering certain aspects of its operations, the assessment could be used to provide assurance on those areas not covered by the SAS 70."

The framework released by the Institute also includes a sample auditor's report that would be provided under the engagement. The framework was developed with assistance from the accounting firms Deloitte & Touche, Ernst & Young, KPMG, and PricewaterhouseCoopers, and received support from a range of interested constituencies, including the ICI Operations Committee, the Broker-Dealer Advisory Committee, and the Bank Trust Record Keeper Advisory Committee.

Media queries should be addressed to the ICI media contacts. Fund, intermediary, or accounting representatives who are interested in learning more about the framework should contact Don Boteler, ICI Vice President, Operations and Continuing Education, at 202/326-5845; Greg Smith, ICI Director of Fund Accounting, at 202/326-5851; or one of the audit firm representatives listed below.

Timothy O'Sullivan, Deloitte & Touche: tiosullivan@deloitte.com
Alan Fish, Ernst & Young: alan.fish@ey.com
Brent Oswald, KPMG: bdoswald@kpmg.com
Barry Benjamin, PricewaterhouseCoopers: barry.p.benjamin@us.pwc.com